"Our research shows that risk-on assets’ outperformance during the 2000s was directly related to the inflation of the global credit bubble. The most popular investments during the decade were all credit-related investments. When one buys risk-on assets, therefore, one assumes that the deflation of the global credit bubble will subside and that credit will again expand. The implied forecast of a risk-off trade is the exact opposite, ie, that the credit bubble will continue to deflate."

Bernstein believes that the current natural course of the global credit market is deflation. So, what's going right now?

"Accordingly, we expect risk-on assets’ outperformance to be periodic when policymakers attempt to reinflate the global credit bubble. Risk-on assets outperformed subsequent to the Federal Reserve’s attempts to stymie US financial sector consolidation, and they have been outperforming more recently as the European Central Bank made moves to thwart European bank consolidation. "

And Bernstein isn't willing to bet on policymakers in the long run.

"But economic history is also full of stark reminders that bubbles cannot be reinflated despite best attempts of politicians to soften the blows of consolidation and deflation. When these economic realities prove more powerful than policy, the risk-off trade outperforms."